Morgan Stanley Research Report Interpretation: The AI sector has dropped to a buying point after the midterm elections—it's time to buy in.

Morgan Stanley published a 93-page global thematic strategy note on November 8 titled "Buy the Drop," arguing that markets overreacted to U.S. midterm election results in which Democrats swept both chambers and won the Texas, Ohio and Georgia governorships, with Texas governor-elect Gina Hinojosa proposing a pause on new data center approvals and Ohio's Dr. Amy Acton proposing a conditional pause. The bank estimates roughly 5GW of U.S. IT capacity (about 4% of total planned capacity) slips from 2028 to 2029, cutting 2028 U.S. new capacity to 19.9GW from 24.9GW (a 4% year-over-year decline) while 2029 additions jump to 27.6GW, a 38% increase, and it kept its 2027/2028 hyperscaler capex forecasts of $1.6 trillion and $1.8 trillion unchanged. The median semiconductor stock in its coverage sits 53% below 52-week highs and the Philadelphia Semiconductor Index has fallen about 40% since mid-June, which the report frames as an entry point across three baskets: hyperscalers (Overweight META at $605.08 with an $820 target, GOOGL at $282.57/$375, AMZN at $260.21/$335, MSFT at $539.93/$650), data center supply chain names (BE, SEI, VST, TLN, CEG, EQIX), and software/AI adopters (PANW, CRWD, SNOW, DDOG, MDB). Compute is the highest-conviction sub-sector, with NVDA the top pick and NVDA and AVGO both near 9x CY28 P/E, alongside MU and SNDK in memory, NXPI and ADI in analog, and ALAB and MRVL in optical. The report also cites AlphaW